Based on an EOQ analysis, the optimal order quantity is 4,000 units. Annual inventory carrying costs equal 30% of the average inventory level. The company pays P 10 per unit to buy the product and P 400 to place an order. The monthly demand for the product is 5,000 units. REQUIRED: Determine the following: A) Annual inventory carrying costs. B) Annual inventory ordering costs. C) Total inventory costs.
Based on an EOQ analysis, the optimal order quantity is 4,000 units. Annual inventory carrying costs equal 30% of the average inventory level. The company pays P 10 per unit to buy the product and P 400 to place an order. The monthly demand for the product is 5,000 units. REQUIRED: Determine the following: A) Annual inventory carrying costs. B) Annual inventory ordering costs. C) Total inventory costs.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:6. Carrying Costs vs. Ordering Costs
Based on an EOQ analysis, the optimal order quantity is 4,000 units. Annual inventory carrying costs equal
30% of the average inventory level. The company pays P 10 per unit to buy the product and P 400 to place
an order. The monthly demand for the product is 5,000 units.
REQUIRED: Determine the following:
A) Annual inventory carrying costs.
B) Annual inventory ordering costs.
C) Total inventory costs.
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